Even though there are 14,000 golf courses across the U.S., according to the National Golf Foundation, golf courses have few options when it comes to protecting themselves against one of their biggest risks: floods.

This gap is concerning given that golf courses are particularly susceptible to floods. “Golf courses are often built with interesting topography, so they're almost always next to the ocean, a river or a lake," says Alex Kaplan, executive vice president of alternative risk at Amwins. “And especially with municipal courses, they're built on cheaper land and are almost always part of the flood plain. There's often a reason why there's a golf course there as opposed to luxury condominiums."

The course itself is the most valuable asset in that “without the course, people aren't going to golf," he says. “But while you can very easily find coverage for the clubhouse, the maintenance barn or the cart shack, it's hard to find coverage for the course itself. And when there is coverage for the course itself—known as 'tees-to-greens' coverage—it may be limited to risks that are not flood-related."

In addition to flooding preventing golfers from using the course and resulting in lost revenue, “often, particularly if it's salt water, the smallest amount of flooding requires courses to replace the grass," Kaplan says. “Sand bunkers can cave in as well."

However, the emergence of parametric insurance is driving a solution for agents to provide hard-to-find flood coverage for their golf course clients.

“Parametric insurance is different from traditional indemnity insurance in that you are indemnifying the insured against the characteristics of the event, not the actual losses incurred like traditional insurance would," Kaplan explains. “With parametric insurance, a trigger is defined that will determine when coverage kicks in."

This new type of parametric insurance is possible through satellite AI technology developed by Floodbase. Floodbase, an AI flood company founded in collaboration with Google, fuses hydrologic modeling and satellite imagery to monitor flooding and flood severity. This technology enables transparent structuring and pricing using a golf course's flooding history. The course is monitored in near real-time, and policies are paid out shortly after flooding is detected on the course.

The No. 1 benefit of a parametric policy is speed. “Carriers are using near real-time data from independent third parties," Kaplan says. “Because there is no ambiguity in a parametric contract, you know exactly what a risk will trigger, at what threshold, and what the process is for pulling the data and paying the claim."

Additionally, parametric policies bring “flexibility in the use of the proceeds because you're indemnifying the insured and not the asset itself," he says. “The insured can use the proceeds from a triggering cover however they see fit to recover from any financial loss from a triggering event. Theoretically, you don't even need physical damage under a parametric policy to recover a financial loss."

While parametric insurance was cost prohibitive as recently as five years ago when there were fewer markets and modeling was very resource intensive, “it's become much more accessible and the minimum premium of parametric structures have gone down considerably," Kaplan says.

“Ask your insureds what they're concerned about, what they would do if they were shut down for three months and how their current coverage would respond," he adds. “Given the extent that flooding is of concern to most golf courses, and that their current policy likely provides no flood coverage, parametric flood insurance is definitely something to take a look at." 

AnneMarie McPherson Spears is IA news editor.